Chancellor Jeremy Hunt is to make an emergency statement today in a bid to stabilise UK public finances.
The Treasury said the move was designed to “ensure sustainable public finances underpin economic growth”. It follows weekend talks between Mr Hunt and embattled Prime Minister Liz Truss.
After his statement, the Chancellor will address the House of Commons later in the day ahead of the October 31 publication of his full medium term fiscal plan.
The move will be seen as an attempt to reassure the financial markets after weeks of turmoil in the wake of former chancellor Kwasi Kwarteng’s £45 billion mini-budget tax giveaway.
The pound jumped higher on news of the statement. Sterling leapt to 1.129 US dollars at one stage, having kicked off more nervously, dipping to 1.122 against the dollar in overnight trading ahead of what many worried would be a tough day on the markets.
Meanwhile the Bank of England has said its bond-buying programme which closed on Friday has “enabled a significant increase in the resilience of the sector”.
The central bank launched a scheme to purchase up to £65 billion of UK government bonds, called gilts, in order to help stabilise prices amid a sell-off amid concerns over unfunded tax cuts in the former chancellor’s mini-budget.
Around £19.3 billion worth of gilts were purchased in total by the Bank of England through the programme.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “New Chancellor Jeremy Hunt has the air of a troubleshooting teacher brought in to turn around a failing school and faces his first big presentation test today with an emergency budget plan wheeled out to try and calm financial markets.
“This is all part of his charm offensive to instil confidence in the Government’s ability to be fiscally responsible, but behind him unruly pupils are still scheming.”
She added: “Today’s developments may hold off a fresh assault on government borrowing costs by the bond vigilantes standing by in the UK gilt market, but it could only be a temporary reprieve.
“Trussenomics may have been ripped up and fed to the shredder but the author of the big gamble remains in power, and has the final say on the direction of travel.
“Investors are craving more stability but, given the flip-flopping we’ve had so far in her super-short tenure, economic policy uncertainty remains and that’s likely to be the key driver in the bond markets and on foreign exchange desks.”
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